cc:

LMI

JPIWG:

ARMY AMCLG-LS USMC LPP-2

ARMY AMCAM-LG DLA J-3331

NAVY NAVSUP 4263C USCG G-SLP

NAVY NAVICP CODE 0416 DISA D422

NAVY IMSD Code 035A GSA FSS FSD

AIR FORCE AFMC-LGSP
1 of 2 ADC 40

Att 

Approved DLMS Change (ADC) 40

Cancellation of the Inventory Control Effectiveness (ICE) Report

 1. Originator:

a. Service/Agency: ADUSD SCI, October 4, 2000 memorandum, subject: Inventory 

Control Effectiveness (ICE) report (Enclosure 1)

b. Originator: Mary Jane Johnson, Joint Physical Inventory Working Group (JPIWG) 

Chair, DLMSO, DSN 427-0677, 703-767-0677, e-mail: maryjane_johnson@hq.dla.mil

2. Functional Area: Supply

3. Requested Change:

a. Title: Cancellation of the Inventory Control Effectiveness (ICE) Report

b. Description of Change: This change implements a DoD policy change which 

cancels the requirement for an ICE report. This change deletes references to the ICE report from 

DoD 4000.25-M, Defense Logistics Management System (DLMS), and DoD 4000.25-2-M, 

Military Standard Transaction Reporting and Accounting Procedures (MILSTRAP). 

 

c. Procedures: Revise MILSTRAP, as amended by Formal Change 5, as follows 

(changes are identified by bold italicized text). DLMS, volume 2, will also be updated as needed 

to reflect the revisions. 

(1) Acronyms and Abbreviations. Delete: "ICE. Inventory Control 

Effectiveness."

(2) Table of Contents. Revise as follows:

Chapter 7 

I Physical Inventory Control Program Performance Assessment.... 7-23

Appendix A FORMS

A5 DELETED

A6 DELETED

(3) Chapter 4. Revise chapter 4, section F, subparagraph 4, as follows:

"4. Report Address wholesale activity receipt processing effectiveness in 

the ICE Report, RCS DD-P&L(Q&SA) 935, as prescribed by chapter 7, 

subparagraph I.2.a(2). The acceptable DoD performance goals for receipt 

processing are: percent posted within the time standard, 90 percent; percent 

stored within the time standard, 90 percent. When computing the overall 

performance against the above time standards, include receipt transactions 

frustrated for a long period of time prior to posting/storing. 
ADC 40

2 of 2

(4) Chapter 7. Enclosure 2 reflects revisions to MILSTRAP chapter 7, as 

amended by Formal Change 5 (changes are identified by bold italicized text). DLMS, 

volume 2 will also be updated as needed to reflect the revisions. 

(5) Appendix A, Forms INDEX. Revise as follows:

INDEX

APPENDIX A5 DELETED

APPENDIX A6 DELETED

4. Reason for Change: 

a. ADUSD SCI cancelled the requirement for the ICE report by their October 4, 2000 

memorandum, subject: Inventory Control Effectiveness (ICE) Report. ADUSD SCI further 

directed that references to the ICE report be deleted from DoD 4000.25-M (DLMS) and DoD 

4000.25-2-M, (MILSTRAP). This change implements this policy. 

b. Cancellation of the ICE report does not relieve the Components of the requirement to 

collect and maintain performance standards and management data in support of the DoD 

Physical Inventory Control Program. Further, ADUSD SCI stipulated that future requirements 

for information regarding the effectiveness of wholesale system assets will be addressed by their 

office as needed. Hence reference to such information is not being deleted from MILSTRAP or 

DLMS. Report Control Symbol DD-P&L(Q)935 continues to apply for anticipated future 

requirements to report effectiveness information to ADUSD SCI.

 

5. Advantages and Disadvantages:

a. Advantages: Relieves the Components of the administrative burden associated with 

gathering the information into a report quarterly, for ultimate submission to ADUSD SCI.

b. Disadvantages: None known. 

6. Impact: 

a. Publications: DoD 4000.25-2-M (MILSTRAP), DoD 4000.25-M (DLMS), and 

Service/Agency publications as applicable.

b. Systems: May impact systems that automatically generate the ICE report. This change 

does not relieve Components of the requirement to collect and maintain performance standards 

and management data in support of the DoD Physical Inventory Control Program. Accordingly, 

system impact is expected to be minimal, and related to production of the report itself. 

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7-1 

CHAPTER 7

PHYSICAL INVENTORY CONTROL

A. GENERAL. This chapter provides procedures, performance objectives, and reporting

requirements for maintaining accurate records of the physical inventory, conducting physical

inventory counts, and reconciling record variance for materiel within the supply system of the

Department of Defense.

1. Applicability. Basic elements of the physical inventory control program prescribed by

this chapter apply to the Military Departments and the Defense Agencies, hereafter referred to

as DoD Components, and establish:

a. Uniform procedures, based on existing DoD policy, for maintaining accurate records,

conducting physical inventories and location surveys/reconciliations, researching inventory

discrepancies and causes for adjustments, performance assessment reporting, and for quality

control of work processes prescribed by the DoD Physical Inventory Control Program.

b. Management control of all DoD wholesale supply system materiel to include:

(1) principal items,

(2) packaged petroleum, oil, and lubricants, 

(3) secondary items regardless of whether assets are purchased with stock fund or

procurement appropriations,

(4) ammunition,

(5) forms and publications, and

(6) subsistence.
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c. Reporting procedures Management data and performance standards necessary

to measure the effectiveness of physical inventory control in the DoD supply system.

2. Exclusions

a. These procedures are not applicable to bulk petroleum; complete ships, aircraft,

ballistic missiles, nuclear weapons, space vehicles; assets located at contractor-owned and/or

contractor-operated facilities which are not maintained on the DoD wholesale property

accountability records; Industrial Plant Equipment reportable to the Defense Industrial Plant

Equipment Center; National Security Agency/Central Security Service assets; and National

Defense Stock Pile assets. Loaned materiel and materiel in transit will be accounted for in

accordance with chapter 4 of this manual and Service/Agency procedures.

b. Physical inventory control procedures for bulk petroleum are contained in DoD

4140.25-M (reference (r)).

c. Nuclear weapons for which DoD has custodial responsibility. Inventories are in

accordance with Joint Publication 6 (reference (s)), Volume II, Joint Reports; Part 4, Nuclear

Weapons Reports; Section 5, Stockpile Inventories and Inventory Reports.

B. POLICY. DoD policy is contained in DoD 4140.1-R (reference (v)).

1. Purpose. The purpose of the DoD physical inventory control process is to: 

a. Ensure materiel accountability is properly executed within the DoD;

b. Ensure accurate property accountability records for the physical inventory are

maintained in support of customer requirements and readiness by performing physical

inventories and location surveys/reconciliations;

c. Identify and help resolve problems in supply system work processes affecting property

accountability records by performing quality control of the work processes; and

d. Identify repetitive processing errors and maintain accurate records for supply system

transactions generated within the supply system by researching and reconciling property

accountability record imbalances and potential discrepancies.
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2. Philosophy

a. The dynamic nature of the physical inventory control function and the cost of counting

and reconciling records requires that the approach be more selective than the "100 percent

wall-to-wall total item count" concept. Available inventory resources must be directed toward

those potential and actual discrepancies, controlled inventory items, and weapon system critical

items for which the maximum returns will be derived from the resources which are applied.

b. A fundamental requirement of inventory integrity is to implement the technical

capability that provides for the total item property record which includes a single shared asset

balance maintained by the storage activity.

3. Security of Materiel. Security is the first line of defense for physical inventory control;

therefore, DoD Components shall pay special attention to the safeguarding of inventory items. 

This shall include analysis of loss rates through inventories, financial liability investigation of

property loss reports (DD Form 200), and criminal incident reports, to establish whether

repetitive losses indicate criminal or negligent activity. Physical security procedures for supply

system materiel are contained in DoD 5200.8-R (reference (t)).

4. Asset Management. A single total item property record shall be shared to provide

materiel asset information. The total item property record shall, as a minimum, include materiel

that is due in, in transit, in organic maintenance facilities, in a contractor's custody, on loan, on

hand in distribution centers, reported on hand at retail activities, and for reported assets in the

custody of users. The record or record set shall identify the quantity, condition, and value of the

item assets for each organizational entity having physical custody of these assets.

5. Maintaining Property Accountability/Responsibility. The property accountability

responsibility for segments of the total item property record may be delegated to, but not shared

by, one or more organizational entities. However, asset balance information for a particular

segment (such as the storage activity balance for an item) will be shared, duplicative records will

not be maintained.

a. The storage activity maintains the property accountability record for all materiel in

storage and is responsible, as a minimum, for materiel custody, care, receipt, storage, and

issue; safeguarding and rewarehousing materiels; physical inventory and research; location

survey/reconciliation; quality control checks; supply discrepancy report initiation, research and

resolution; investigating and assessing financial liability for loss, damage, and destruction of
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Government property; and appropriate actions necessary to ensure that the physical on-hand

quantity and the total item property record quantity are in agreement.

b. The owning Service or Agency shall assume or assign the accountability for materiel

not in the physical custody of a storage activity, including materiel inducted for organic repair,

test assembly/disassembly, conversion, modification, or reclamation; materiel in a contractors

hands (in accordance with provisions of the FAR (reference (ss)); materiel in transit; materiel on

loan, etc.

c. The Integrated Materiel Manager is responsible for initiating and directing the

conduct of physical inventories; discrepancy research and reports; resolving discrepancies,

investigating, and assessing liability for loss, damaged, and destruction of Government

property; and take appropriate actions necessary to ensure that the on-hand quantity and the

total item property record quantity are in agreement for all DoD materiel that is not in the

physical custody of DoD Activities.

6. End of the Day Processing. Use the following end of the day processing procedures

pending the established of single shared asset balances (See paragraphs B.2. and B.4.

above.).

End of the day processing shall be accomplished as follows:

(1) Owners/managers and storage activities shall match all active record (i.e., stock

numbers which had any transactions affecting record balances) on-hand balances daily. The

storage activity shall submit the daily closing on-hand balance to each affected owner/manager

using DI Code DZH, Location Reconciliation Request, prepared in the appendix C59 format,

citing Type of Location Reconciliation Request Code 1 in record position 7.

(2) Storage activities shall prepare asset status transactions by line item (stock

number + supply condition code = line item), type of pack and date packed/expiration date for

subsistence, for each record experiencing transactions affecting the balance (including zero

balance) and for no physical inventory adjustment required (DI Code D8A with zero quantity)

transactions. The storage activity shall also submit DI Code DZM, End of Day Accountable

Transaction Count, prepared in the appendix C65 format, to advise the owner/manager of the

number of balance affecting transactions that were forwarded during the daily course of

business. This transaction is compared to the actual number of transactions received by the

owner/manager to identify missing transactions and aid in unreconciled balance (URB)

research.
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7-5 

(3) Owners shall match the storage activity asset status to the affected records. 

Imbalances will be programmatically researched to assure consideration of in-float documents,

delayed transactions, and duplicate transactions. For unresolved mismatched quantities, the

owner/manager will update the affected record on-hand balance with the storage activity's

closing on-hand balance. The mismatched quantity (gains and losses) shall be adjusted with a

DI Code D8B/D9B, Inventory Adjustment Increase/Decrease (Accounting Error) transaction. 

(4) Owners/managers will request assistance from the storage activity to isolate

causes of record imbalances to maintain transaction level integrity. The storage activity

assistance should focus on data transmission, e.g., lost transactions, etc.

7. Reconciling Total Item Property Records with Financial Records. Owning

Services/Agencies shall reconcile total item property records and financial records as

prescribed by DoD 7000.14-R (reference (ee)) to ensure compatibility of the total inventory

value reflected by these records and associated reports.

8. Item Management/Control. DoD materiel is managed and controlled by stock number

and supply condition code and by type of pack and date packed/expiration date for subsistence;

therefore, physical inventories shall be conducted and the results reported to owners/managers

by stock number and supply condition code and by type of pack and date packed/expiration

date for subsistence.

9. Storage Activity Record Keeping. Storage activities shall maintain quantitative

balance records for all materiel on hand regardless of ownership. Storage activities shall

maintain transaction histories to support the balance records. Maintenance of these records

shall provide the capability to detect theft or diversion of materiel and improve the ability to

determine the cause of inventory variances for corrective action. 

10. Inventory Prioritization. DoD Components shall select and prioritize items for

inventory for which they are accountable as follows:

a. Inventory Sampling. A stratified, hierarchal inventory sample will be accomplished at

least once annually for the purpose of validating the accuracy of the accountable record. The

results of the sample will be reported in accordance with the stratification and tolerances cited in

paragraph B12e. 
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7-6 

b. Complete inventories shall be accomplished as follows:

(1) Controlled Inventory Items. The following controlled inventory items (identified in

DoD 4100.39-M (reference (ll)) require complete physical inventory and do not qualify for use of

a random statistical sampling approach:

(a) Top secret.

(b) Narcotics, drug abuse items, and alcohol.

(c) Category I nonnuclear missiles and rockets (semiannually in accordance with

DoD 5100.76-M (reference (dd)).

(d) Precious metals.

(e) Small arms.

(f) Radioactive items.

(g) Inert nuclear ordnance materiel.

(h) Other items that may be designated by OSD or the DoD Component.

(2) If ammunition or subsistence is subjected to complete inventory, physical

inventory and location survey may be conducted concurrently.

(3) Controlled inventory items not subject to annual complete physical inventory must

be subjected to annual random statistical sampling. Acceptable statistical sampling techniques

are widely prescribed and may be used so long as every item included in the population has an

equal probability of being selected in the sample. The statistical sampling technique must

provide reasonable assurance (as a minimum) that the property accountability records are

accurate with a 95 percent level of confidence, accuracy level of 85 percent, and a maximum

margin of error of 2 percent. If the sample inventory results do not satisfy the above criteria,

complete physical inventory of the population from which the sample was selected, will be

performed.

c. Inventories for items not designated for complete inventory under subparagraph

B.10.b. shall be accomplished as a result of:
CH 5 

DoD 4000.25-2-M

1/NOTE: This function is being evaluated by the Joint Physical Inventory Working Group for

proposed revision, and has not been implemented in the Distribution Standard System

ADC 40

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7-7 

(1) Total or partial materiel release denials (spot inventory--see subparagraph C.4.b.

and appendix B3, Type of Physical Inventory/Transaction History Code E).

(2) Location reconciliation variances. 

(3) Location survey errors.

(4) Owner/manager request (special inventory); or

(5) Selection based on a physical inventory prioritization system1 that considers

characteristics such as weapon system significance; recorded inventory quantity and dollar

value; demand quantity, value, and frequency; proximity of anticipated replenishment action;

forecasted replenishment quantity and value; and period of time since last inventory. The

prioritization system shall be run (as a minimum) quarterly and the results shall be used for

scheduling items for physical inventory. Owners/managers shall provide quarterly updates to the

variables on the second Thursday of the second month of each quarter. Updated variables will

be provided in DI Code DZL, Inventory Prioritization Information, prepared in appendix C62

format. If no updates are received from the owners/managers, the storage activity will use the

prior quarter's values. Items selected for inventory through the use of selection systems/models

shall not be given priority over items in subparagraphs B.10.a., B.10.b., B.10.c(1), B.10.c(2),

and B.10.c(3).

11. Potential Discrepancies. Potential discrepancies between the actual physical count

of materiel and the property accountability record on-hand balance shall be researched and

resolved in accordance with figure 7-1 (see page 7-32) either by:

a. Correctly posting supply transactions (e.g., receipts, issues, adjustments, etc.)

discovered during the research process that were previously incorrect or unposted resulting in

the record imbalance; and/or

b. Posting an inventory adjustment to correct the record imbalance.

12. Accuracy and Performance Goals. The acceptable DoD accuracy and performance
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7-8 

goals are as follows:

a. Materiel Denial Goal: Not greater than 1 percent.

b. Receipt Processing Performance Goal: 90 percent stored and posted within

MILSTRAP, chapter 4, time standards.

c. Location Audit Program Goal:

(1) Location Survey Accuracy:

(a) 97 percent - General Supplies.

(b) 98 percent - Ammunition.

(2) Location Reconciliation Accuracy:

(a) 97 percent - General Supplies.

(b) 98 percent - Ammunition.

d. Ammunition Property Accountability Record Accuracy Goal: 95 percent.
CH 5 

DoD 4000.25-2-M

2Within 30 days after the end of the 4th quarter each fiscal year, Components

must submit record accuracy goals information to ADUSD SCI, via electronic mail. 

Submit to: mcneilsa@acq.osd.mil. Data may be obtained throughout the year.

3Applicable Units of Issue: AT, AY, BF, BK, CD, CF, CZ, DZ, FY, FT, FV, GP, GR,

HD, KT, LB, MR, OZ, OT, PG, PR, SE, SF, SO, SP, SY, TD, TE, TF, TN, TO, TS, MC, MX,

YD

ADC 40

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7-9 

e. General Supplies Record Accuracy Goals2.

 

GENERAL SUPPLIES RECORD ACCURACY GOALS

STRATIFICATION SUB-POPULATIONS AND ASSOCIATED GOALS AND TOLERANCE

LEVELS

CATEGORY SUB-POPULATION

RECORDS

ACCURACY

GOAL

TOLERANCE

A UNIT PRICE > $1,000 99% 0%

B UNITS OF ISSUE WHICH MAY BE NONDEFINITIVE OR

DIFFICULT TO MEASURE3

 OR

(ON-HAND BAL > 50 AND EXTENDED VALUE < $50,000)

 OR

NSN ACTIVITY (# transactions affecting balance in one year) 

> 50

95% 10%

C DATE OF LAST INVENTORY > 24 MONTHS 

 AND

ON-HAND BALANCE < 50

95% 5%

D ALL OTHER MATERIEL NOT MEETING ABOVE CRITERIA 95% 0%

For submission at time of submission of the 4th quarter fiscal year Inventory Control

Effectiveness (ICE) Report (data may be obtained throughout the fiscal year).

95% Confidence Level

+4% Bound applicable to each category.
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C. PHYSICAL INVENTORY PROCEDURES

1. Inventory Program Accomplishment. Storage activities will monitor program

accomplishment throughout the fiscal year to ensure that the requirements of paragraph B.10. are met.

2. Preinventory Planning. The potential for count inaccuracies will be reduced by conducting

preinventory planning to include:

a. Actions to ensure location integrity by correcting such situations as unbinned/loose

materiel; questionable identity of materiel in location; and single locations containing multiple supply

condition codes or stock numbers, inadequately labeled shelf-life items (date of

manufacture/assembly/pack or date of expiration/inspection/test, as appropriate); and/or materiel lots

stored in a single location.

b. Document cleanup to ensure to the extent possible that receipts, adjustments,

transaction reversals, and other transactions are posted to the property accountability record and that

in-process receipts are stored in location prior to the established physical inventory cutoff date.

3. Scheduled Inventories

a. Storage activities will initiate all scheduled inventories based on item characteristics,

specifically the controlled inventory item code and any other category codes designated by DoD

Components that require physical inventory not less than once each fiscal year, with DI Code DJA,

Physical Inventory Requests, prepared in the appendix C16 format, using Type of Physical

Inventory/Transaction History Code G.

b. Storage activities will initiate all scheduled inventories based on selection and

prioritization model criteria with DI Code DJA requests, using Type of Physical Inventory/Transaction

History Code I.

c. Storage activities will initiate the scheduled random statistical sample inventory to

meet the Departments requirement to validate the accuracy of the supply records with DI Code DJA

requests using Type of Physical Inventory/Transaction History Code N. 

d. Owners may initiate a scheduled random statistical sample inventory of line items

owned to determine the overall accuracy of their records with DI Code DJA, using Type of Physical

Inventory/Transaction History Code L. Storage activities may also initiate a scheduled random
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statistical sample inventory of line items in storage to determine the overall accuracy of their records

with DI Code DJA, using Type of Physical Inventory/Transaction History Code P.

4. Unscheduled Inventories

a. Owners, AOs, and storage activities will initiate special inventories using DI Code

DJA transactions, prepared in the appendix C16 format. If an inventory has not been taken within the

past 90 calendar days, cite Type of Physical Inventory/Transaction History Code C, D, J, or K in the

transaction. If an inventory has been taken within the past 90 calendar days, an effort will be made to

construct a transaction history and from it determine what the item balance should be or what

discrepancy may have caused an imbalance. Only when these efforts fail to produce satisfactory

results will special inventories be generated. In this case, cite Type of Physical Inventory/Transaction

History Code H in the DI Code DJA transaction. The procedure for restricting special inventories may

be waived when the inventory manager has recorded backorders for the item involved.

b. Storage activities will initiate spot inventories as a result of a total or partial materiel

denial on classified and sensitive items regardless of value, pilferable items when the value of the

variance is greater than $100, and for noncontrolled items variances greater than $5000. These

requests will cite Type of Physical Inventory/Transaction History Code E.

c. Storage activities shall accomplish all requests for spot inventories.

d. Storage activities may initiate unscheduled inventories as a result of on-hand balance

mismatches between the locator and property accountability records with DI Code DJA, using Type

of Physical Inventory/Transaction History Code M.

5. Canceling Inventories

a. When conditions exist which preclude accurate completion of an inventory which has

been established, the inventory will be canceled by the storage activity or the owner/manager.

Conditions which may require cancellation include, but are not limited to, catalog changes,

rewarehousing of materiel under inventory, insufficient resources, insufficient time to meet established

inventory timeframes to notify other affected owners/managers, and acts of God.

b. When an owner/manager cancels an inventory, the owner/manager will notify all

affected storage activities using a DI Code DJA Physical Inventory Request citing Management Code

N.
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c. When a storage activity cancels an inventory, or when an owner/manager requests

cancellation of an inventory, the storage activity will notify the requesting owners using the DI Code

DJA Physical Inventory Request citing Management Code N. When a canceled inventory is required

to meet annual inventory schedule requirements, it must be rescheduled by the storage activity within

the current fiscal year. When a spot inventory (Type of Physical Inventory/Transaction History Code

E) is canceled, it must be rescheduled within 15 calendar days.

6. Conducting, Recording, and Reporting the Inventory

a. Physical inventory procedures at storage activities will provide the required asset-torecord accuracy with positive control of materiel and documentation which are in float, including

materiel release orders, receipts, condition transfers, catalog and other data changes, etc.

b. The storage activity may reduce the volume of in float accountable documents, during

the period required for an item count, by suspending the issue of low priority materiel release

transactions from items undergoing inventory. However, materiel will be released for items undergoing

inventory when such release is necessary to meet the order/ship timeframes prescribed by DoD

4140.1-R (reference (v)), to include the recognition of the RDD. The storage activity may also reduce

the volume of in float accountable documents by deferring routine supply condition code changes,

providing the chapter 5 control requirements are complied with.

c. Storage activities will complete physical inventories and transmit the appropriate DI

Code D8A/D9A Inventory Adjustments to the owner/manager within 30 calendar days subsequent to

the Physical Inventory Cutoff Date (PICD) for scheduled inventories and within 15 calendar days

subsequent to the PICD for unscheduled inventories.

d. The storage activity will compare the adjusted count with the balance maintained by

the storage activity to determine the potential variance and initiate postcount validation and

preadjustment research as required under section D.

e. Immediately upon completion of postcount validation and preadjustment research,

the storage activity will record the count and date of last inventory on the storage activity quantitative

balance record.

f. When no adjustment is required, the storage activity will update the storage activity

record with the date of last inventory and transmit a DI Code D8A with zero quantity for each line item
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to the owner/manager to indicate completion of the inventory. The owner/manager will update the date

of last inventory using the adjustment transaction date. 

g. When the storage activity record reflects more than one owner for commingled

materiel, the storage activity will apply all gains and losses to the wholesale manager. The storage

activity will prorate any losses that cannot be applied to the wholesale manager among all owners

having balances. Storage activities will not consider foreign owner balances in the prorating process.

Foreign owner and SDAF balances will not be altered unless they are the only remaining balances for

reporting a loss. Resolution of these losses will be in accordance with DoD Security Assistance

Program policy.

h. The storage activity will process DI Code D8A/D9A adjustments by line item, and

by each date packed/expiration date and type of pack for subsistence, to update the storage activity

quantitative balance record and each owner/manager record.

7. Reconciling Manual Records for Controlled Items. When manual records are

maintained for control of assets in secured storage, the storage activity, as a minimum, will reconcile

these records at the time of inventory with the corresponding storage activity records and physical

counts of materiel.

8. Following Up for Unscheduled Physical Inventory Followup Report

a. When the owner/manager has requested an unscheduled inventory and no adjustment

or completion transaction has been received within 40 calendar days of the date of the request, the

owner/manager will initiate a followup using a DI Code DJA request which cites Management Code

X in record position 72 and duplicates the remaining data from the DI Code DJA transaction which

established the inventory.

b. The storage activity will respond to the owner/manager followup within 5 calendar

days by providing the appropriate adjustment, completion, or cancellation transaction. If an adjustment

or completion transaction was previously submitted and a followup is received, the storage activity will

reply by submitting a DI Code DJA with Management Code Y to the owner/manager and Transaction

History Transmittal (DI Code DZK) reflecting the actual physical inventory adjustment.

c. If the storage activity does not have a record of the owner/manager original DI Code

DJA request, the storage activity shall process the DI Code DJA with Management Code X as an

original DI Code DJA.
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D. RESEARCH OF POTENTIAL OR ACTUAL PHYSICAL INVENTORY ADJUSTMENTS

1. Policy. DoD Components will ensure that potential or actual adjustments are researched

in accordance with the value of the adjustment and type of item involved. The DoD criteria for this

research are set forth in figure 7-1 (see page 7-32) and will be used as the basis for selective

research for supply system materiel. A reduction of the volume of erroneous adjustments can only be

achieved by conducting specified degrees of research before posting the adjustment transaction.

More stringent research requirements may be imposed by DoD Components based upon the limits

of resources available and upon specific asset control problems. However, in no case will adjustments

be processed against items without required preadjustment research having been performed (see

figure 7-1, page 7-32). 

2. Objectives. Analysis of inventory adjustments is vital in order to:

a. Identify failures in the control systems so improvements can be made.

b. Reduce similar discrepancies in the future.

c. Ensure that the proper adjustment was made.

d. Evaluate indicators of trends or system problems for corrective action.

e. Detect negligence, abuse, or theft of materiel. Known or suspected negligence,

abuse, or theft will be researched in accordance with DoD 7200.10-M (reference (cc)) and figure 7-1

(see page 7-32).

3. Timeliness of Research. Timely completion of the research of potential adjustments is

essential. Delay only increases the complexities of adequate research and reduces the probability

of conclusive findings.

a. Storage activity preadjustment research must be completed and the physical

inventory adjustment/completion action posted to the owner/manager record within 30 calendar days

from the PICD for scheduled inventories and 15 calendar days from the PICD for unscheduled

inventories.

b. The storage activity must complete mandatory causative research within 45 calendar

days from the date the adjustment transaction was posted. Sample causative research must be

completed within 45 calendar days from the date the sample causative research listing is created.
CH 5 

DoD 4000.25-2-M

4The Integrated Materiel Manager may use the error classification codes in record

positions 63-65 in DI Codes D8B/D9B Inventory Adjustment Transactions (Accounting Errors)

pending the establishment of single shared asset balances (see paragraphs B.2. and B.4.). 

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4. Transaction History Requests. For intra-Service/Agency (or inter-Service/Agency, based

on agreement of the DoD Components involved) reconciliation, the owner/manager may request

transaction history for analyzing inventory discrepancies.

a. The owner/manager will request the history using a DI Code DZJ Transaction

History/Custodial Balance Request, prepared in the appendix C60 format, citing in record position 7

the appropriate type of physical inventory/transaction history code from appendix B3. Transaction

history will consist of all transactions affecting the balance for the requested timeframe. 

b. The storage activity will provide the transaction history data using the DI Code DZK,

Transaction History Transmittal, prepared in the appendix C61 format. Transmit the history using the

media specified by the type of media code (see appendix B17) entered in record position 60 of the

DI Code DZJ request.

5. Error Classification Coding. Causes of potential/actual inventory adjustments are

determined by research. Causes will be classified, analyzed, and evaluated so action may be taken

to correct situations that are causing the errors. Error classification codes will be entered in positions

63-65 of DI Code D8A/D9A Inventory Adjustment Transactions.4 For analysis and evaluation, error

conditions will be identified to the operation in which they occurred (e.g., receiving, issue, etc.) and

classified by type within each operation. For reporting purposes, each operation and each error type

have been identified by an alphabetic or numeric code as shown in appendix B18. The error

classification system is structured to provide the Services/Agencies the latitude to amplify the DoD

defined error classifications; however, DoD Components will summarize internally defined error

classifications to the appropriate DoD classification for all reports provided to higher authorities,

auditors, etc.

6. Error Cause Feedback and Correction

a. The storage activity will provide prepare a quarterly summary of the causative

research results -- as reported by the error cause code -- and provide feedback to the commander

of the storage activity concerned. As a minimum, the activity will provide include a summary of the

number and value of adjustments by error cause codes.
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b. Storage activities will use this information in conjunction with other local indicators

to identify and correct recurring errors in their operations (e.g., through initiation of training, increased

frequency of quality control checks, and other actions as required).

7. Controlled Inventory Item Adjustments. Unresolved physical inventory adjustments for

all classified and sensitive items regardless of value, and for pilferable items when the adjustment is

in excess of $2,500, as prescribed by DoD 7200.10-M (reference (cc)), will be referred to security

officials of the storage activity at which the adjustment occurred to determine whether there is

culpability or when fraud, waste, or abuse is suspected (see figure 7-1, page 7-32).

8. Materiel Release Denials. MILSTRIP (reference (h)) prescribes DoD standard document

formats, data codes, and criteria for the preparation and processing of materiel release denials at

storage activities and inventory control points. 

a. Upon initiation of a materiel release denial citing Management Code 1, 2, 3 (applies

to subsistence only), or 4 (applies to subsistence and ammunition only), storage activities will:

(1) Reverse the issue, adjust the storage activity record on-hand quantitative

balance to zero, and transmit a DI Code D9A for the adjusted quantity to the owner/manager

attempting to issue the materiel, citing denial Management Code 1, 2, 3, or 4, and a DI Code D9A to

any other owners affected by the denial loss, citing denial Management Code Q.

(2) Initiate a spot inventory as required under paragraph C.4(b) of this chapter.

(3) If the inventory results in positive reporting of assets, reverse all or part of the

loss that was taken prior to processing any inventory gain transaction and transmit a DI Code D9A

reversal to the owner/manager.

b. If an inventory can be accomplished without delaying the processing of the Materiel Release

Order beyond the prescribed UMMIPS timeframes (see DoD 4140.1-R (reference (v)), it may be

conducted prior to processing a denial transaction.

E. REVERSAL OF INVENTORY ADJUSTMENTS. Reversal of DI Code D8A/D9A Inventory

Adjustments is a required capability which must be implemented with proper controls and supported

by proper documentation. (See appendix C, introduction, paragraph 3.b., for processing adjustment

reversals.) Procedures for reversing adjustments will contain, as a minimum, the following control

features:
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DoD 4000.25-2-M

5The location reconciliation process will not be required with the establishment of single

shared asset balances (see paragraphs B.2. and B.3.).

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1. Posted/Unposted Source Documents. Reversals required to correct inventory records when

posting previously unposted or incorrectly posted supply transactions (e.g., receipts, issues, etc.),

regardless of age, are limited to those transactions that can be properly documented to reference the

specific transaction document number(s) that will be processed to offset the reversal.

2. Inventory Adjustment Corrections. Reversals required to correct physical inventory

adjustments which were made based on incorrect/incomplete information are limited to two years from

the date of the original adjustment unless the requirements of paragraph E.1. are met. All reversals

must be properly documented.

3. Limitations. Reversals will not be processed solely on the basis of a previous offsetting

physical inventory adjustment.

4. Reporting Requirements. Performance Assessment. Reversals against transactions

processed within the adjustment reporting period will be separated and identified as follows: to

report:

a. Gross adjustment during the current period,

b. Reversal of prior quarters' adjustment transactions,

c. Reversal of current quarters' adjustment transactions, and

d. Total value of net adjustments during the current period (i.e., value of net gains added to

value of net losses).

F. LOCATION AUDIT PROGRAM. Each DoD Component will implement a location audit program

which will consist of both a location survey and a location reconciliation.5 The DoD acceptable

accuracy goals are provided in paragraph B.12.c. The DoD Components may impose more stringent

standards internally. The location audit program is subject to the quality control checks delineated in

Section H., Quality Control Program. Errors will be subject to validation and research before they are

counted as an error. Location audit program results will be reported in the ICE Report as

prescribed in paragraph F.1.h. and F.2.b. Only one error per surveyed location and one error

per location reconciliation line item with discrepancies is to be reported; however, DoD
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Components will collect and analyze all type III errors (see paragraphs F.1.h(3) and F.2.b(3)) by

element. 

1. Location Survey

a. Location survey requires a physical verification, other than actual count, between physical

assets and recorded location data to ensure that all assets are properly recorded. When a

discrepancy is identified during the location survey program (type I or type II error (see paragraphs

F.1.h(1) and F.1.h(2)), the storage activity will conduct prompt research and determine the need for

a special inventory (DI Code DJA request with Type of Physical Inventory/Transaction History Code

K). In some instances, location survey and physical inventory will be conducted concurrently for

ammunition. When location survey and physical inventory are conducted concurrently, both

the physical inventory and the location survey performance statistics will be reported

separately in the ICE Report.

b. Location survey will be accomplished at each storage activity not less than once each fiscal

year, by (1) performing complete location survey of all locations; (2) using a statistical sampling

methodology that ensures all locations are included in the population sample and has a probability

of selection; or (3) a combination of complete and statistical sampling. 

c. A location survey will be conducted in both the gaining and losing storage areas following

the accomplishment of rewarehousing projects. A location survey conducted as a result of

rewarehousing projects may be considered to have satisfied the annual survey requirement for the

area surveyed.

d. The proper sequence of operating a location survey requires the comparing of assets in

storage locations with locator records. This sequence of operation is important to detect assets in

unrecorded locations.

e. As an objective, it is desirable to identify items to inventory location survey lots or

segments. Lots/segments will be of a manageable size (number of items) to permit location survey

in a minimum time period, to ensure maximum uninterrupted service to customers, and to obtain the

greatest degree of accuracy from the location survey.

f. Items within a lot/segment which have been subject to a complete item inventory will be

considered to have satisfied the annual survey requirement when the entire lot/segment is located in

a clearly designated, coterminous warehouse space. These inventoried lots/segments may be
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excluded from the complete survey for the fiscal year in which they were counted. ; however, the

location survey performance statistics will be reported in the ICE Report.

g. When permanent locations are reserved for items, recorded locations which are unoccupied

will be identified and/or verified during the location survey.

h. To measure the accuracy of the results of the location survey, discrepancies will be

classified in one of the three categories listed below. Only one error per stock number per location

is charged when locator delete, or locator establish, or locator record correction is required for the

same location. When the stock number and actual assets differ, the discrepancy will be classified as

a locator establish action only.

(1) Locator record deleted. The removal or change of a locator record when there is a

recorded location but there are no physical assets -- unless the location is being held open for new

receipts. (Type I location survey error.)

(2) Locator record established. The recording of locations when assets are physically

found in storage and no locator records exist, or when the recorded stock number disagrees with the

materiel in the location. (Type II location survey error.)

(3) Locator record corrected. Changes to the locator record when physical materiel

characteristics differ from any of the following data elements (Type III location survey error): 

(a) Unit of issue.

(b) Supply condition code.

(c) Controlled inventory item code (see DoD 4100.39-M (reference (ll)), Volume 10,

Table 61). Verification of the code will consist of ensuring that assets are stored in areas providing

the degree of security commensurate with the assigned code.

(d) Type of pack code (for subsistence only). (See MILSTRIP (reference (h)), appendix

B23.)

(e) Lot number or serial number (for ammunition only).

(f) Completeness and accuracy of magazine data card (for ammunition only).
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6The location reconciliation process will not be required with the establishment of single

shared asset balances (see paragraphs B.2. and B.4.).

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(g) To ensure accuracy of property accountability records, special inventories should

be performed when assets are found in an erroneous or unrecorded location or when there are

mismatches in the unit of issue that may result in a quantity variance.

2. Location Reconciliation6

a. Location reconciliation requires a match between storage activity records and

owner/manager records in order to identify and to correct situations when there is: (1) an

owner/manager record with no corresponding storage activity record, (2) a storage activity record with

no corresponding owner/manager record, (3) common elements of data that do not match, and (4)

quantity discrepancies. Mismatches will be researched and special inventories conducted when

required to effect corrective action.

b. To measure the accuracy of the results of the location reconciliation program, discrepancies

will be classified in one of the four categories listed below (report only one error per location

reconciliation request or unmatched accountable error):

(1) Owner/manager record reflects balance for storage activity; no location reconciliation

transaction received. (Type I location reconciliation error.)

(2) Location reconciliation transaction received from storage activity; no corresponding

owner/manager record. (Type II location reconciliation error.)

(3) Mismatch on any of the following data elements (Type III location reconciliation error):

(a) Unit of issue.

(b) Ownership/Manager Identifier.

(c) Controlled inventory item code (see DoD 4100.39-M reference (ll)), Volume 10,

Table 61).

(d) Type of pack code (subsistence only).

(e) Shelf-life code.

(f) Date packed/expiration date (subsistence only).
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(4) Quantity discrepancy. (Type IV location reconciliation error.)

c. Location reconciliation will be accomplished by DoD Components in accordance with the

following guidance:

(1) Owners/managers and storage activities will reconcile all records annually. The annual

reconciliation will be accomplished at the close of business on the second Tuesday of the month in

accordance with paragraph F.2.c(3).

(2) Storage activities will prepare location reconciliation request transactions by line item,

and by type of pack and date packed/expiration date for subsistence, for each stock number

regardless of the balance (including zero balances). Location reconciliation requests will be identified

by DI Code DZH, prepared in the appendix C59 format, using Type of Location Reconciliation

Request Code 2 in record position 7, and transmitted to the owner/manager. Storage activities

preparing DI Code DZH requests will assure that consecutive transaction numbers by RI code are

assigned to location reconciliation requests for control purposes.

(3) All owner/manager and storage activity records (active and inactive records, including

zero balances) will be reconciled not less than once each fiscal year. Location reconciliation requests

will be prepared on the second Tuesday of the month indicated in the following schedule and

transmitted prior to the 15th day of the scheduled month.

Service or Agency Preparation Date Transmission Date

Army 2nd Tuesday - Jan Jan 15th

Navy 2nd Tuesday - Mar Mar 15th

Marine Corps 2nd Tuesday - May May 15th

Air Force 2nd Tuesday - Jul Jul 15th

Defense Logistics Agency 2nd Tuesday - Sep Sep 15th

(4) Storage activities and owners/managers will establish the following provisions for

controlling location reconciliation:

(a) Storage activities will advise intended recipients (owners/managers) of the number

of transactions being forwarded, transmission date, and the medium (DDN, mail, etc.) using DI Code

DZN Location Reconciliation Notification transaction (appendix C64). 
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(b) When transaction history (DI Code DZK Transaction History Transmittal) is required

to accompany DI Code DZH, the storage activity will advise intended recipients (owners/managers)

of the number of DI Code DZK transactions being forwarded, the cutoff date, and the medium (DDN,

mail, etc.) using DI Code DZP Location Reconciliation History Notification transaction (appendix C65).

(c) Owners/managers will use the DI Code DZN and DI Code DZP transactions to

determine receipt of all DI Code DZH and DI Code DZK transactions. Where the number of DI Code

DZH or DI Code DZK transactions to be transmitted does not match what was actually received, the

owner/manager may reject the DI Code DZN or DI Code DZP transaction using DI Code DZG

Transaction Reject with Reject Advice Code AY.

(5) In processing location reconciliation requests, owners/managers will match the requests

to the owner/manager records. When a mismatch is programmatically unresolved, DI Code D8B/D9B

will be processed to adjust the owner/manager records. All Type I, II, and IV mismatches meeting the

criteria for causative research (see figure 7-1, page 7-32) will be resolved as follows:

(a) Research of owner/manager active and historical records.

(b) Research of storage activity active/historical record (DI Code DZJ, Transaction

History Request, citing Type of Physical Inventory/Transaction History Code X).

(c) Request physical inventory (DI Code DJA, using Type of Physical

Inventory/Transaction History Code J).

(d) If the above actions fail to resolve the mismatch, the DI Code D8B/D9B transaction

will remain on the owner/manager records.

(6) A physical inventory is not required under the following conditions, except when the

mismatch involves classified or sensitive items, or pilferable items when the extended dollar value of

the variance is greater than $100.

(a) The owner/manager record may be adjusted without special inventory when the

extended value of the variance is $5,000 or less and 10 percent or less of the beginning value of the

variant owner/manager record for Type IV, errors (see paragraph F.2.b(4)).

(b) The owner/manager record may be adjusted without special inventory when the

extended value of the variance is $5,000 or less for Type I and Type II errors (see paragraph F.2.b(1)

and F.2.b(2)).
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(7) When a discrepancy is identified during the location reconciliation program, transmit

the following transactions, as appropriate, to the submitting activity:

(a) DI Code DZG Transaction Reject, as prescribed in chapter 9, prepared in the

appendix C58 format.

(b) DI Code DZB Storage Item Data Correction, as prescribed in chapter 10, prepared

in the appendix C53 format.

G. RETENTION OF ACCOUNTABLE DOCUMENTATION. Audit capability is required for a period

of time following the processing of documents and data and completion of the research effort. The

following retention criteria will apply:

1. Source Documents. Retain original source documents or facsimiles, i.e., microform

(microfilm, microfiche), Compact Disk-Read Only Memory (CD-ROM), etc., for at least 2 years. Where

source documents are produced, these include only accountability change documents such as

receipts, issues, shipments, transfers, supply condition code changes, and inventory and financial

adjustments. Retain source documents providing evidence of shipment to Foreign Military Sales

recipients for 2 years from date of materiel shipment.

2. Transaction Histories. Retain registers, records, files, tapes, and data for at least 2 years

in a format useful for audit trail purposes. Automated inventory control systems will be designed to

facilitate the printout of transaction histories which indicate the date the last physical inventory was

conducted for each item. 

3. Adjustment Research. Retain backup documentation that directly pertains to individual cases

of physical inventory adjustment research efforts for at least 2 years.

4. Annual Statistical Sample. Retain the annual statistical sample inventory line item detail data

for at least 2 years.

H. QUALITY CONTROL

1. Goals and Objectives. DoD Components will establish a quality control program at each

owner/manager and storage activity which encompasses the objectives of DoD Directive 5010.38

(reference (x)), and the physical inventory objectives contained in DoD 4140.1-R (reference (v)).

Portions of the program can be accomplished during ongoing practices within inventory processes.

Quality control results will assist management in identifying those human, procedural, or system errors
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which adversely affect record accuracy and in achieving better control over physical materiel and

warehousing practices. Within the scope of this quality control program, those work processes directly

related to the control of physical materiel will be monitored for attained quality levels and performance

evaluated on improvements, not numerical goals. Accordingly, all quality control programs will include

reviews to assess the accuracy/quality of the following work processes:

a. Warehousing practices -- to include checks of storage practices, stock rotation, shelf-life

management, identification of materiel in store, mixed stock, location accuracy and rewarehousing

projects.

b. Receiving practices -- to include checks of documentation, materiel identity, quantity, and

supply condition code; checks for processing timeliness; and verification of daily input data to the

location system.

c. Issuing practices -- to include checks of legibility of issue documents; accuracy of stock

selection as to identity, quantity, unit of issue, shelf life, supply condition code, and type of pack

(subsistence only); marking of outgoing shipments; and release to carriers.

d. Validity of automated data -- to include checks of receipt, issue, and adjustment transaction

data entries against input documentation.

e. Inventory practices -- to include checks of inventory counts, location surveys, location

reconciliation corrective actions, causative research, and adjustments at both the owner/manager and

storage activities.

f. Catalog practices -- to include checks of catalog change processing, accuracy, and

timeliness, using the affected recorded locations as the universe.

g. Locator file updates -- to include checking the accuracy of changes posted to the locator file

(e.g., all additions, deletions, and changes of unit of issue, supply condition code, shelf life, etc.).

h. Report of discrepancy processing -- to include checks for processing timeliness and

checking the accuracy of SDR initiation, followup and reply, investigative research including

identification and correction of supply errors, adjustment of accountable and financial records, and

preparation of financial liability investigation of property loss reports (DD Form 200).

i. Logistics reassignment processing -- checks to determine if the logistic reassignment

actions were completed; e.g., LIM/GIM records were changed to reflect decapitalization/ transfer, LIM
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directed the storage activity to change the decapitalized/ transferred assets to GIM ownership, the

storage activity effected and advised the LIM of the change, and the LIM initiated action to resolve any

quantity variances.

j. Suspended asset processing -- to include checks of the timeliness in reclassifying

suspended (Supply Condition Codes J, K, L, Q, and R) materiel.

2. Assignment of Responsibility. Whenever possible, quality control checks of these work

processes will include identification of the individual performing the tasks. This will facilitate the

placement of responsibility for appraising and improving quality with each manager within the chain

of command.

3. Command Emphasis. Continued command management emphasis and review of

performance are essential for the success of the quality control program. Command managers must

ensure effective organizational interrelationships among the functional elements concerned with the

physical inventory control program such as: comptroller, data systems, transportation, warehousing,

maintenance, quality control, and supply management. The quality control program will include

provisions for initiation of corrective action when acceptable quality levels are not met.

I. PHYSICAL INVENTORY CONTROL PROGRAM PERFORMANCE ASSESSMENT

INVENTORY CONTROL EFFECTIVENESS REPORTING

1. General. Each DoD Component will collect and maintain performance standards and

management data prescribed in sections I.2 and I.3 paragraphs I.1.b. and I.1.c, prepare an

Inventory Control Effectiveness Report, as formatted in appendix A5, for general supplies for

each quarterly period ending December 31, March 31, June 30, and September 30 for all

materiel for which the Component maintains the property accountability record. This includes all DoD

wholesale supply system assets of principal and secondary items, including package fuels, less all

materiel exclusions listed in DoD 4140.1-R (reference (v)). When required to report this

information to higher authorities, Report Control Symbol DD-P&L(Q)935 applies. Army, Navy,

and Air Force will also prepare an ICE Report, as formatted in appendix A6, for their service

peculiar ammunition. (RCS DD-AT&L(Q)935 applies.) Army will prepare a separate report for

the SMCA. DoD Components will:

a. Include a narrative analysis identifying trends, accomplishments, significant

comments on internal system performance, description of problems, actions in process or

taken to correct the problem and "get-well" dates if the problem is not corrected at the time the
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7 Reported Performance data maintained by DLA for materiel stored at DSS locations

regardless of ownership. Maintained Reported by Service for material stored at Service

depots.

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ICE Report is submitted. Problems in reporting ICE data should also be highlighted in the ICE

Report until the problem(s) is corrected.

b. Reflect inventory control performance [for all DoD wholesale supply system assets

of principal and secondary items, including package fuels, less all materiel exclusions listed in

DoD 4140.1-R (reference (v)).] [<<== Moved to paragraph I.1. above]

c. Submit an original and one copy to: DEFENSE LOGISTICS MANAGEMENT

STANDARDS OFFICE, ATTN: DLMSO Ste 1834, 8725 JOHN J KINGMAN ROAD, FT.

BELVOIR, VA 22060-6217 not later than 75 calendar days following the end of the reported

quarter. The above reporting requirement has been assigned Report Control Symbol DDP&L(Q)935.

2. GENERAL SUPPLIES PERFORMANCE STANDARDS AND DATA

ICE Report Preparation Instructions for General Supplies. The following instructions are

provided for preparing the Inventory Control Effectiveness Report.

a Report Heading/Columns

(1) Reporting Organization. Enter the name of the reporting DoD Component.

(2) Quarter Ending. Enter the applicable fiscal quarter; 1st, 2nd, 3rd, or 4th. Data

entered for the report lines and subcolumns under this column heading reflect only activity

occurring during the applicable quarter.

(3) Fiscal Year to Date. Enter the applicable fiscal year.

(4) Columnar Entries. Data entered for the report lines and subcolumns under this

column heading reflect cumulative fiscal-year-to-date activity.

a. PART I. Performance

(1) Materiel Denials7 
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8Reported Performance data maintained by DLA for materiel received at DSS

locations regardless of ownership. Reported Maintained by Service for materiel received at

Service depots.

9The location reconciliation process will not be required with the establishment of single

shared asset balances (see paragraphs B.2. and B.4.).

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(a) Lines Directed for Shipment. Enter The total number of line items directed for

shipment (A5_ MRO, A5J DRO, A4_ referral order, A2_ redistribution order).

(b) Total Materiel Release Denials. Enter The total materiel denials (sum of total and

partial denials, and warehouse refusals). Include denial transactions classified by denial Management

Codes 1, 2, 3 (subsistence only), 4, 5, 6, and 7 (see appendix B7) in the total.

(c) Materiel Denial Rate. Compute this figure by dividing the total denials by the line

items directed for shipment and multiplying by 100. {(1)(b) / (1)(a) x 100} The DoD performance goal

for the materiel release denial rate is not greater than one percent.

(2) Receipt Processing Performance8

(a) Receipts Posted and Stored. Enter The total number of line item receipts posted

and stored to the total item property record.

(b) Receipts Posted and Stored on Time. Enter The total number of line item receipts

which were effectively posted and stored within the MILSTRAP timeframes. Both storing and posting

actions are considered complete when the item is in the storage location, or available for issue, and

the quantity is posted to the total item property record.

(c) On Time Receipt Rate. Compute this figure by dividing the total number of receipts

posted and stored on time by the total number of receipts and multiplying by 100. {(2)(b) / (2)(a) x 100}

The DoD performance goal for posting and storing receipts on time is 90 percent.

(3) Location Audit Program. Reflects the results of the location survey (ratio of accurate

storage activity locator records to storage activity locations surveyed) and the location reconciliation

9

 (ratio of valid storage activity location records to inventory manager's records).
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10Reported Performance data maintained by DLA for locations surveyed at DSS

locations regardless of ownership. Reported Maintained by Service for locations surveyed at

Service depots.

11Reported Performance data maintained by Owner/Manager regardless where

materiel is stored.

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(a) Locations Surveyed10. Enter The number of storage activity locations surveyed.

(b) Survey Errors. Enter The total number of location discrepancies as defined in

paragraph F.1.h. of this chapter (report only one error per stock number per location).

(c) Survey Accuracy. Compute this figure by dividing the locations with discrepancies

by the total locations surveyed multiplying by 100, and subtracting the result from 100 percent. {100-

((3)(b) / (3)(a) x 100)} The DoD goal for location survey accuracy is 97 percent.

(d) Locations Reconciled11. Enter The total number of location records reconciled (i.e.,

the sum of line items on the Inventory Manager's record and line items which were not on the Inventory

Manager's record but were on the storage activities' records).

(e) Reconciliation Errors. Enter The total number of discrepant location records as

defined in paragraph F.2.b. (count one error per location reconciliation request (line item) or

unmatched Inventory Manager's record).

(f) Reconciliation Accuracy. Compute this figure by dividing the number of

discrepancies by the number of records reconciled, multiplying by 100, and subtracting the result from

100 percent. {100-((3)(e) / (3)(d) x 100)} The DoD goal for location reconciliation accuracy is 97

percent.

b. PART II. Physical Inventory and Adjustments 

(1) Physical Inventories

(a) Number of Scheduled and Unscheduled Inventories Completed. Enter The total

number of line items inventoried (scheduled and unscheduled). Each supply condition code for a stock

number at each storage activity is a line item.

(b) Number of Inventories with Variances. Enter The total number of line items

inventoried (scheduled and unscheduled) which had an inventory variance.
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12The end of day process and location reconciliation process will not be required with the

establishment of single shared asset balances (see paragraphs B.2. and B.4.).

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(c) Inventory Variance Rate. Reflects the percent of line items inventoried which had

an inventory variance. Compute this figure by dividing the lines with an inventory variance by the total

line items inventoried and multiplying by 100. {((1)(b) / (1)(a)) x 100}.

(d) Number of Inventories with Major Variances. Enter The total number of line items

inventoried (scheduled and unscheduled) which had a major inventory variance (overage or shortage

exceeding $5,000) and all variances on controlled items.

(e) Major Variance Rate. Reflects the percent of line items inventoried which had major

inventory variances. Compute this figure by dividing the lines with a major inventory variance by the

total line items inventoried and multiplying by 100. {((1)(d) / (1)(a)) x 100}

(2) Number of Adjustments from Other Than Physical Inventories12

(a) Number of Location Reconciliation Adjustments. Enter The number of location

reconciliation adjustments (DI Code D8/9B).

(b) Number of End of the Day Processing Adjustments. Enter The number of end of the

day processing adjustments (DI Code D8/9B).

(c) Total. Absolute total of adjustments from other than physical inventories. {(2)(a) +

(2)(b)}

(3) Total Adjustments. Enter The sum of number of inventories with variances and the

number of adjustments from other than physical inventories. {(1)(b) + (2)(c)}

(4) Number of Reversals of Inventory Adjustments

(a) Number of Gain Reversals. Enter The number of gain reversals of inventory

adjustments.

(b) Number of Loss Reversals. Enter The number of loss reversals of inventory

adjustments.
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(c) Total. Absolute total of inventory reversals (gains and losses). 

(5) Monetary Value

(a) Average Value of Inventory. Enter The average value of on-hand assets as reflected

on financial records for the 12 months prior to the report cutoff date (i.e., current quarter plus last three

quarters).

(b) Record Value of Items Inventoried. Enter The extended value prior to actual

inventory of line items inventoried (scheduled and unscheduled) during the reporting period.

(c) Value of Inventory Adjustments

1 Physical Inventory Adjustments

a Gains. Enter Monetary value of gains resulting from inventory less the

monetary value of gain reversals (from current and prior quarters) processed during the report period.

b Losses. Enter Monetary value of losses resulting from inventory less the

monetary value of loss reversals (from current and prior quarters) processed during the report period.

c Gross Adjustments {(5)(c)1 a + (5)(c)1 b}

2 Reversals -- Current Quarter

a Gains. Enter The total monetary value of decreases to the record balances

as a result of reversing gain adjustments processed during the reporting period. Compute the FY to

Date value for reversal of current quarter gains by adding the Quarter Ending value for reversal of

current quarter gains to the prior quarter FY to Date value of reversal of current quarter gains. 

b Losses. Enter The total monetary value of increases to the record balances

as a result of reversing loss adjustments processed during the reporting period. Compute the FY to

Date value for reversal of current quarter losses by adding the Quarter Ending value for reversal of

current quarter losses to the prior quarter FY to Date value for reversal of current quarter losses. 

c Total. Absolute total of reversals of current quarter gains and losses. {(5)(c)2

a + (5)(c)2 b}
CH 5 

DoD 4000.25-2-M

ADC 40

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7-31 

3 Reversals -- Prior Quarters

a Gains. Enter The total monetary value of decreases to record balances as

a result of reversing gain adjustments reported in prior quarters. Compute the FY to Date value for

reversal of prior quarters gains by adding the quarter ending value for reversal of current quarter gains

to the prior quarter gains. 

b Losses. Enter The total monetary value of increases to record balances as

a result of reversing loss adjustments reported in prior quarters. Compute the FY to Date value for

reversal of prior quarters' losses to the prior quarter FY to Date value for reversal of prior quarters'

losses. 

c Total. Absolute total of reversals of prior quarter gains and losses. {(5)(c)3

a + (5)(c)3 b}

4 Total Reversals. The total of reversals of current quarter and prior quarter gains

and losses. {(5)(c)2 c + (5)(c)3 c}

5 Total Record Imbalances. The total of gross adjustments and total reversals.

{(5)(c)1 c + (5)(c)4}

(6) Gross Adjustments as a Percent of: 

(a) Average Value of Inventory. Divide the total value of gross adjustments by the

average value of inventory and multiply by 100. {((5)(c)1 c / (5)(a)) x 100}

(b) Value of Items Inventoried. Divide the total value of gross adjustments by the record

value of items inventoried and multiply by 100. {((5)(c)1 c / (5)(b)) x 100}

(7) Total Record Imbalances as a Percent of:

(a) Average Value of Inventory. Divide the value of the total record imbalances by the

average value of inventory. {((5)(c)5 / (5)(a)) x 100} 

(b) Value of Items Inventoried. Divide the value of the total record imbalances by the

record value of items inventoried. {((5)(c)5 / (5)(b)) x 100}
CH 5

DoD 4000.25-2-M

13The end of day process and location reconciliation process will not be required with the

establishment of single shared asset balances (see paragraphs B.2. and B.4.).

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(8) Monetary Value of Location Reconciliation13

(a) Value of Line Items Reconciled. Enter the extended value of line items reconciled

during the reporting period.

(b) Gains. Enter The monetary value of gains resulting from reconciliation during the

period.

(c) Losses.Enter The monetary value of losses resulting from reconciliation during the

period.

(d) Total. Absolute total of location reconciliation gains and losses. {(8)(b) +

(8)(c)}

(9) Monetary Value of End of the Day Processing

(a) Gains. Enter The value of gains resulting from end of the day processing.

(b) Losses. Enter The value of losses resulting from end of the day processing.

(c) Total. Absolute total of end of the day processing gains and losses. {(9)(a) +

(9)(b)}

3. Ammunition Performance Standards and Data ICE Report Preparation Instructions

for Ammunition

a. Report Heading/Columns

(1) Reporting Organization. Enter the name of the reporting DoD Component.

(2) Quarter Ending. Enter the applicable fiscal quarter, 1st, 2nd, 3rd, or 4th. Data

entered for the report lines and subcolumns under this column heading reflect only activity

occurring during the applicable quarter.

(3) Fiscal Year To Date. Enter the applicable fiscal year. Data entered for the report

lines and subcolumns under this column heading reflect cumulative fiscal year to date activity.
CH 5 

DoD 4000.25-2-M

14The location reconciliation process will not be required with the establishment of single

shared asset balances (see paragraphs B.2. and B.4.).

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(4) Columnar Entries. Report data separately for high-risk items (Controlled

Inventory Item Codes 1, 2, 5, 6, and 8) and low-risk items (Controlled Inventory Item Codes

3, 4, U, and P).

a. PART I. Performance

(1) Materiel Denials. Complete as described in paragraphs I.2.b(1)(a), I.2.b(1)(b), and

I.2.b(1)(c). For ammunition, include denial transactions classified by denial Management Codes 1,

2, 5, 6, and 7 (see appendix B7) in the total. Components will report identify denials separately for

low-risk and high-risk items.

(2) Receipt Processing Performance. Complete as described in paragraphs I.2.a(2)(a),

I.2.a(2)(b), and I.2.a(2)(c). The DoD goal for posting and storing ammunition receipts on time is 90

percent.

(3) Location Audit Program. Complete as described in paragraphs I.2.a(3)(a),

I.2.a(3)(b), I.2.a(3)(c), I.2.a(3)(d), and I.2.a(3)(f). The DoD goals for location survey accuracy and

location reconciliation accuracy for ammunition are 98 percent.14

b. PART II. Physical Inventory and Adjustments

(1) Physical Inventories. 

(a) Number of Scheduled and Unscheduled Inventories Completed. Enter The total

number of line items inventoried (scheduled and unscheduled). Each supply condition code for a stock

number at each storage activity is a line item.

(b) Number of Inventories with Variances. Enter The total number of line items

inventoried (scheduled and unscheduled) which had an inventory variance.

(c) Inventory Record Accuracy. Reflects the percent of lines inventoried without an

inventory variance. Compute this figure by dividing the lines with an inventory variance by the total lines

inventoried and multiplying by 100, and subtracting the result from 100 percent. {100 - ((1)(b) / (1)(a))

x 100} The DoD inventory record accuracy goal for ammunition is 95 percent. 

(2) Number of Inventory Adjustments from Other Than Physical Inventories.

Complete same as paragraph I.2.b(2).
CH 5

DoD 4000.25-2-M

15The end of day process and location reconciliation process will not be required with the

establishment of single shared asset balances (see paragraphs B.2. and B.4.). 

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7-34 

(3) Total Inventory Adjustments. Complete same as paragraph I.2.b(3).

(4) Number of Reversals of Inventory Adjustments. Complete same as paragraph

I.2.b(4).

(5) Monetary Value. Complete same as paragraphs I.2.b(5)(a) through I.2.b(5)(c)5.

(6) Gross Adjustments As a Percent of: Complete same as paragraphs I.2.b(6)(a) and

I.2.b(6)(b).

(7) Total Record Imbalances As a Percent of: Complete same as paragraphs

I.2.b(7)(a) and I.2.b(7)(b).

(8) Monetary Value of Location Reconciliation.

15 Complete same as paragraphs

I.2.b(8)(a) through I.2.b(8)(d).

(9) Monetary Value of End of the Day Processing.8 Complete same as paragraphs

I.2.b(9)(a) through I.2.b(9)(c).
CH 5 

DoD 4000.25-2-M

16Sample causative research in lieu of complete causative research for pilferable, and

CIIC 7, item discrepancies with a value from $.01 to $2,500 may be accomplished to serve as a

deterrent to fraud waste or abuse and to identify systemic inventory and security problems. 

Causative research will be conducted on all adjustments (gains and losses) of classified and

sensitive items regardless of dollar value of item or extended dollar value of adjustment. 

Causative research will be conducted on all adjustments (gains and losses) of pilferable items,

and CIIC 7 items, with an extended value greater than $2,500, and all adjustments with an

extended value of greater than $16,000 or greater than 25 percent unit variance and greater than

$5,000. 

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MINIMUM RESEARCH REQUIREMENTS

FOR POTENTIAL OR ACTUAL PHYSICAL INVENTORY ADJUSTMENTS

CONDITION OF DISCREPANCY REQUIRED RESEARCH

Post

Count

Validation

Preadjustment

Research

Causative

Research

1. < $1,000 NO NO NO

2. > $1,000 but < $5,000 and < 10 percent unit

variance

YES NO NO

3. > $1,000 but < $5,000 and > 10 percent unit

variance

YES YES NO

4. > $5,000 but < $16,000 and < 25 percent

unit variance

YES YES SAMPLE

5. > $5,000 but < $16,000 and > 25 percent unit

variance 

YES YES YES

6. > $16,000 YES YES YES

7. Controlled Inventory Item YES YES YES16

8. Suspected Fraud, Waste, or Abuse YES YES YES

 Figure 7-1